Did Somebody Change the Charter?

San Diego City Charter Section 80 states that the City can't appropriate money for a contract, agreement or other obligation unless the Auditor and Comptroller certify that the required money is "IN THE TREASURY." But the City is going ahead with the downtown library even though there is a shortfall of $32.5 million of money needed. The City is assuming the money will come forward. The Turner Construction Company, which is doing the project, is due to receive an amount not to exceed $127.9 million.

A document called a "Certificate of Unallotted Balance," signed by James Long, an accountant working for the Comptroller says, "I hereby certify that the money required for the allotment of funds for the purpose of the foregoing resolution is available in the Treasury OR IS ANTICIPATED TO COME INTO THE TREASURY." Hmm.

A "Certificate of Unencumbered Balance" signed by Comptroller Ken Whitfield uses the same verbiage: sufficient funds are "actually in the Treasury, OR ARE ANTICIPATED TO COME INTO THE TREASURY." Hmm again. This seems to me like going to the bank for a $50 million loan, and trying to put up a lottery ticket as collateral.

"It is a big difference to say money is in the bank and the check is in the mail," says former City Attorney Mike Aguirre.

The Sanders administration, in its self-professed wisdom, refuses to speak to the Reader. So I can't get any explanation for this. But it looks to me that the Charter has been violated, or unilaterally changed in some way. Was the public made aware of this change? If somebody either inside or outside the administration has an explanation for me, I would like to hear it.

Comments

Praise be to God. Mayor Sanders and his staff have solved the pension issues too. When the bill for pension payment comes due each July, Sanders and his successors can just say MONIES FOR THIS DEBT ARE ANTICIPATED TO COME INTO THE TREASURY. It's true! Money will come into the treasury, someday.

Remember Mayor Sanders promised the most transparent administration I don't believe he said anything about ethical or following, as City Attorney Jan Goldsmith called it the highest law or our "Constitution" for the City.

Who cares about little details like $30-40 million dollars when a bronze plaque with hizoner's name will be forever emblazoned at the building's entrance.

Don, your 70+ years are catching up with you. You're obviously confused we're building a legacy, not a library.

"Could you please explain how hoped-for private gifts could equate with anticipated normal City revenues to qualify as “is anticipated to come into the treasury” in a Comptroller certification under Charter Section 80?

Also, how can the Comptroller “encumber” the former? The concept of encumbering anticipated future City revenue is widespread but such revenue must be a City entitlement not some hoped-for generosity of a private citizen or citizens."

You know, that recent City Council admission by the Independent Budget Analyst, saying she hasn't yet sat down with the City chief financial officer to look at output from SAP's new One SD accounting/business system, somehow makes complete sense in the light of the above...

Response to post #1: Good points -- a heckuva legacy. One person, who sometimes contributes to this blog, told me by phone, "They are doing financing in two parts: the first for the shell, the second for interior improvements. I think that is how they get away with doing it that way." I said it still sounds like they are evading the clear purpose -- both the letter and spirit -- of the charter. This person agreed but said, "They do it all the time." Best, Don Bauder

Response to post #2: More good points, JW. Another person called me and said that there was a winking understanding between Irwin Mark Jacobs and the council. Upon giving his big gift, he told them, perhaps sotto voce, that if the $32.5 million didn't come in, he would pick up the rest of the tab. I had wondered if that had happened all along. But if so, is the City going to continue taking such chances? Is it going to continue going against the clear language of the charter? It seems to me that if you can pull this stunt, you can pull anything with the same pretext: the check will some day be in the mail. Best, Don Bauder

Response to post #3: Great, Pat. Let us all know what he says. The citizens have to vote on any change in the charter. But apparently not in this instance. Have similar gambits been used many times before, as one caller suggests? The politicians all talk about transparency. Was this accomplished in public view? Best, Don Bauder

Response to post #6: Anybody who looks at what the City has to pay SDCERS every year for the next several years can see that San Diego is insolvent. Those payments cannot be made unless there is accounting prestidigitation that hasn't been concocted yet. And they want to build a library when they are $32.5 million short, along with a civic center, convention center expansion and $600 million to $900 million subsidy for a Chargers stadium? What are they smoking? Best, Don Bauder

I think it is called,
"Bond Floatopia"
and it's now illegal everywhere..

As far as all those GIANT payments go,
I don't think that is a real worry because when the City declares Bankruptcy, all of those will go "away"; so the real question is how much money in debt can the City go before pulling the plug (SDG&E new rate tax included)...

"...all moneys applicable to its payment which before the maturity thereof are anticipated to come into the treasury to the credit of such appropriation shall, for the purpose of such certificate, be deemed in the treasury to the credit of the appropriation from which the contract, agreement or obligation is to be paid."

@ #11: All true, but consider - for the moment - that Adam Smith's magical hand somehow produces the funding necessary to finish building a library, even furnishing it. I'm not saying that'll happen, but even if it did, libraries everywhere have cut their hours because they can't even afford the staffing!

It would be like finding funding to build a railway from here to Las Vegas, even finding an engine and some passenger cars. So, you build it, knowing full well that you can't even afford to staff it with an engineer and crew?

Response to post #16: Actually, you are describing what happened in Vegas. Speculators wildly overbuilt casinos, condos, homes, and now it is suffering one of the worst real estate depressions in the nation. Best, Don Bauder

Don:
I got a prompt and very detailed response from Jan Goldsmith personally. He obviously takes your concerns very seriously.
He emphasized this part of Section 80 “all moneys applicable to its payment which before the maturity thereof are anticipated to come into the treasury to the credit of such appropriation shall, for the purpose of such certificate, be deemed in the treasury to the credit of the appropriation from which the contract, agreement or obligation is to be paid”.
He pointed out that the Comptroller’s certificate covers Phase 1 only. It does not apply to Phase 2. The Phase 1 contract is for a total amount of $127,931,121.00 and is fully funded relying in part on $30,770,000 of privately pledged funds.
He attached two MOLs from John Witt, one from ’90 and one from ’91, dealing with the questions of “anticipated” income and phased funding of contracts. So he appears to have done his homework.
As I understand it, he seems satisfied that the pledged $30,770 can properly be treated as “anticipated” income under Section 80 for Phase 1 and the “missing” $32 million applies to Phase 2, which has not yet been contracted.
He ended with:
“In sum, we have an enforceable contract for the donations pledged so far ($30,770,000), and we haven’t authorized construction of that part of the library that depends on future donations ($32,512,092).”
I hope that helps you and your readers.

Thanks Pat, and Don. I think a downtown library is a great thing...I wanted one nearer the water for many years (remember that?). But. I guess we will all find out where this ride takes us. Perhaps it is a shell game...government without government. The faces of the dysfunctional legacy builders (which faces are missing?):
http://www.sandiego.gov/mayor/news/librarygroundbreaking.shtml

Look deeper into the SAP implementation project...it's required under the SEC consent agreement, and looks to be over budget and late.

I read the original contractor's statement of work, a few years back, and I could see why it failed. Now that SAP has taken over the implementation, what's going on? They didn't want to touch it at first, hence the failed (thwarted?) contractor attempt...have they somehow succeeded in deriving realistic requirements, developing the system, and deploying it?

As a2z mentions, the City's IBA and CFO haven't sat down to review if the new system's financial reports are accurate...

Compared to original estimates, what have we spent so far on this SAP system, and how much more do we anticipate spending?

Most importantly, did this new system lead to re-working the basic business processes of the city, thereby saving us money through new efficiencies, or did it get manhandled by public employees who forced the system designers to duplicate existing processes, leading to stagnation, an illogical workflow within the system, and little lasting advantage over the old systems?

"August 1, 2018 - Downtown San Diego opened the new Sanders Library this morning in a ceremony attended by 27 people. Heralded as San Diego's greatest civic accomplishment in almost a decade, city drinking fountains were turned on in celebration for ten minutes after the conclusion of the event. The new library will be open on Mondays and every other Thursday from 11 AM until 2PM, or as staffing permits. Volunteer firefighter spokesperson Ima B. Bissy reminded all in attendance that smoking is prohibited within a five mile radius of the building because of water shortages and damaged roads which prohibit fast arrival of any of the five County fire engines which are now staffed solely by volunteers."

Response to post #22: Appreciate your contacting Goldsmith. His explanation is the same as was given to me by a city hall watcher, which I passed on in post #5. In my opinion, Goldsmith's interpretation is just so much fustian -- claptrap, construction of an elaborate legal Babel to get around both the letter and the spirit of a law. Since he says it apparently originated with Witt, this may suggest that the city had very deep financial problems earlier than we have suspected. I would like to hear the opinions of other lawyers who contribute to this blog. Thanks, Pat. Best, Don Bauder

Response to post $23: I agree with you, JW, and unless I have missed something, I agree that the fancy footwork represents both evasion and non-transparency. The last I talked with Aguirre, which was this morning, he didn't believe his office had ever used this maneuver while he was in office. If something like this slipped by him, or he deliberately let it go through, then Mike should take a mea culpa, too. Best, Don Bauder

Response to post #24: When I was opposing the ballpark back in the late 1990s, I thought a downtown library would be a good idea. But I can't defend such a position now with the city essentially broke. Best, Don Bauder

Response to post #26: It's a good bet that news story will make it into print within the time frame you suggest. That presupposes that there will be enough reporters left in town to cover the story. Best, Don Bauder

This is why this city is so upside down. The THOUGHT alone of building a library with the city in the financial shape it is in is just insane. INSANE!

So what does KFC Sanders do, spend more money, that is nto there, by playing word games with the charter.

I would LOVE to see Bruce Henderson, or a private citizen, file a lawsuit to enjoin this scam from going one step further.....of course the next problem you would run into are judges that have the IQ of a circus chimp or just straight up a rubber stamp for the establishment.

Response to post #35: Again, one of my sources believes that Irwin Mark Jacobs gave his winking assurances that if the money doesn't come through, he will pony up enough to finish the library. So a lawsuit challenging the dubious way in which the city dodged the charter might be declared moot. Then again it might not, if the suit challenged the evasion technique and not the structure itself. Best, Don Bauder

Response to post #36: I didn't read anything about Mike's one-on-one with Roger Showley. I assume it was in the U-T, but I must have missed it. Yes, Mike did say that Jacobs's giving hurt the city in two instances. One was when Qualcomm (the company), which he then headed, came through and bought naming rights, permitting the city to go ahead with the 60,000 seat guarantee, which turned out disastrously, and the re-making of the stadium to make it football-only, which also didn't work, because in a short length of time the Chargers were right back lobbying for a new stadium, despite their commitment to the contrary. Second, Aguirre thought Jacobs's library gift was a mistake because it permitted the city to go ahead with a project for which it had a huge financing hole.

I talked with Mike this morning. He said that he has read the two opinions by John Witt that Goldsmith claims to be relying upon. Those opinions had nothing to do with a situation in which the city does not have the money for a project, Aguirre says. Goldsmith should have issued a new opinion, says Aguirre.

I agree with that. This is more disingenuousness of this administration. This is secret, backroom politics -- exactly the same kind that got the city into so much difficulty. This legalistic dodging should have been done in the open. The city has opened the door to going ahead with projects without financing in place. Frankly, I wonder if employment of this kind of law circumvention is the only way the convention center expansion, new city hall complex, and massive Chargers stadium subsidy could go forward. Best, Don Bauder

Regarding #23
That is actually an old "trick", much used by the Redevelopment Agency (aka City Council) to build (for less money now) then to do the required TI (Tenant Improvements) later, thus making the project appear to cost less initially, so that they can be done ASAP.

But in reality with cost over runs and all the "well we have to finish what we started" additional fund requests, the entire Project cost, ends up being way more than expected...

"Later Logic" is the opposite of "Cheap Logic" and goes like this:

What the heck, we are going to be paying for this Project with "future" money and we all know that, so actually funding it will be someone else's problem because all of US (the current Leaders and their decision NIMBY's) will by then, be retired and on their $weet Public Dole or gone buy buy to their next Project...

Response to post #39: But somebody should tell the council that with property tax assessments coming down, TOT receipts soft, sales tax income weak as retail sales recede, the expected future money is not going to come in as it has in the past. Best, Don Bauder

Response to post #40: Thanks for your legwork on this entry. I always appreciate help from a distinguished blogger such as yourself. I hope this discussion continues. San Diegans should know the extent to which so-called leaders are resorting to gross distortions to pretend that San Diego is not on the edge of a fiscal abyss. This expectation of future revenues, and circumventing of the charter, cannot go on. There is a very good chance that the revenues are not going to be there in the future. For the library: very possibly. For other projects: No. Best, Don Bauder

CCDC's $80 million cash contribution to the DT Library could have balanced this year's budget and saved lives. It is not a question of the merit of any of these capital projects, we simply can't afford to pay for day-to-day commitments.

Response to post #45: I suspect that a lot of old manuscripts and books can't be found online. And online isn't the best way to study material closely. Also, I hope there will be lots of computer terminals in the new library for use of people. This does not mean I am in favor of the project. I would be if the City weren't insolvent. Best, Don Bauder

Response to post #80: No hip boots for me. I want to see how often this trick is used, and in what other contexts other than the one under discussion -- the library that is not funded. Best, Don Bauder

In order to stop detractors who worry about the 4,000 homeless taking over the beautiful new Library, Library supporters should help solve the Homeless problem by forcing the City of San Diego to buy the 26.64 acre Midway Post Office to first to get everyone off the streets and sidewalk, and finally as a Campus for Homeless Veterans and reintegrating veterans back into beautiful San Diego civilian life.

Response to post #50: I agree that taking care of the homeless problem should be a high priority. In fact, it might enhance tourism, help relieve the condo/hotel glut in the ballpark district, maybe even help improve Padres attendance (although an increase in attendance doesn't help the City; increasing sales tax revenue at Petco goes to the team, not to the general fund, and increased attendance would raise the cost of services, particularly police.) Best, Don Bauder

With a new downtown library the public will get a wonderful resource consisting of access to all the public and government documents that that are currently housed in the Basement of the existing Public Library. These archived files are inaccessible to the General Public.

For historic and research types, access to browse these off-limit public and historic documents will be a great resource for future San Diegans.

Regarding #53
Sure and for $100+ MILLION less they could be housed in another empty downtown building providing access "For historic and research types, access to browse these off-limit public and historic documents will be a great resource for future San Diegans." and that savings would also include upgrading ALL our other Libraries PLUS keeping them open for all San Diegans...

I challenge any "historic and research types" to say that would not be much better for all San Diegans...

Response to post #54: I don't know if City officials even looked at the many vacant spaces in planning the library. In planning the new city hall complex, they cooked the books to make the vacant space look expensive, and thus not a viable option. Best, Don Bauder